Securities Commission Malaysia releases property crowdfunding framework and announces 8 new market operators

• Framework includes eligibility criteria and exit strategy at tenor end with a RM500k price cap
• ECF & P2P market provides US$84 mil alternative financing for nearly 900 Malaysian SMEs

THE Securities Commission Malaysia (SC) announced, today, eight new recognized market operators comprising three equity crowdfunding (ECF) and five peer-to-peer (P2P) financing platforms. They received their letters of registration from the SC chairman Syed Zaid Albar, witnessed by Minister of Finance, Lim Guan Eng, before the start of the Fintech Roundtable organised by the SC.

The roundtable discussed the progress of the fintech industry in fostering digital innovation to meet the financing needs of small and medium enterprises (SMEs) and enable greater financial inclusion for Malaysian issuers and investors.

‘‘The SC will continue to facilitate development of innovative digital solutions which democratise access to investments while broadening financing options available for all Malaysians,” said Syed Zaid.

With the addition of the new ECF and P2P financing players, which will operationalise by the end of the year, there are now 21 market-based financing platform operators registered in Malaysia. As at end-March 2019, the ECF and P2P financing market has provided close to US$84 million (RM350 million) of alternative financing for nearly 900 Malaysian SMEs.

Property crowdfunding

The SC also released a new property crowdfunding framework following amendments made to its Guidelines on Recognized Markets. This is pursuant to an initiative announced in Budget 2019 to provide an alternative financing avenue for first-time homebuyers.

Property crowdfunding offers the same potential as that of ECF and P2P financing platforms in providing an alternative source of financing but is specifically tailored for first-time homebuyers. At the same time, it will provide investors access to a new investment option.

To support the integrity of the scheme and protect investors’ interest, the revised guidelines list out the requirements and obligations of a property crowdfunding platform operator. These include minimum shareholders’ funds of RM10 million; obligation to provide fair, clear and timely information to both homebuyers and investors prior to participating in a property crowdfunding campaign; and exit certainty at the end of the agreed tenor.

The scheme is only open to Malaysian citizens, 21 years of age and above who have not owned a property before, whether individually or jointly. They type of property has also been strictly defined and must be independently valued to be worth a cap of RM500,000 or below. The homebuyer is also not allowed to sell or transfer the property during the scheme’s tenor and must stay in the property during the period of the tenor, which is set by the crowdfunding scheme.

The SC stresses that framework was issued after taking into consideration, among others, feedback and input from members of the public including industry players during a recent public consultation by the SC.

Interested parties can submit their application to operate a property crowdfunding platform to the SC from 17 May 2019 to [email protected]. More details can be found here.